A shortage of letters of credit (L/Cs) is having a negative impact on Nigerian small businesses according to the managing director of Kresta Laurel, an importer of material handling equipment.

Dideolu Falobi blames the L/C shortage on foreign exchange curbs by the Central Bank of Nigeria (CBN).

Dollar peg

At the end of September, CBN adjusted its exchange rate peg to 196.5 naira (N196.95) against the US dollar from the N197 set in July.

The adjustment was the sixth since the central bank introduced tight controls on the foreign exchange market in February.

The managing director of Kresta Laurel, which deals in elevators, cranes, hoists and generators, says that his business has been hit, "very, very badly", by the central bank's actions.

Delivery uncertainty

He can no longer guarantee delivery times because the company requires additional finance for its imports but cannot rely on its bankers to confirm an irrevocable L/C because of a lack of foreign exchange.

According to Falobi, the company sometimes has to wait several weeks to obtain L/Cs from its bankers, which makes it "almost impossible for us to keep our words in terms of delivery," he says.

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